Chancellor Rachel Reeves has announced a significant change to the UK's import rules, confirming that the customs duty exemption for low-value parcels from overseas will be scrapped.
A Move to Level the Retail Playing Field
Currently, a tax loophole allows overseas online retailers to send small parcels valued at less than £135 to the UK without customers paying any import duties. The Chancellor stated this move is designed to stop foreign firms from "undercutting our high street businesses" and will instead "support a level playing field in retail."
This policy has long been a point of contention for British retailers, who argued it created an uneven playing field. Major high street names including Next, Superdry, and Primark had been urging the government for an overhaul, pointing out that it gave international giants like Shein and Temu a significant price advantage.
The Financial and Commercial Impact
The financial scale of the issue is substantial. Industry experts have suggested the loophole costs the UK retail sector up to £600 million annually. Furthermore, the British Retail Consortium (BRC) estimated in a pre-Budget submission that the total value of these small packages surged by 53% to £5.9 billion last year, up from £3.9 billion the year before.
Ms Reeves had signalled her intention back in April, promising to follow the lead of the US and Europe by reviewing the customs treatment ahead of the Budget.
Mixed Reactions and Future Outlook
While the move is welcomed by domestic retailers, industry analysts warn it may have consequences for consumers. Silvia Rindone, UK and Ireland retail lead at EY, commented: "Closing the import duty loophole for small parcels is a positive step towards fairer competition, but it could also push up online prices, prompting consumers to reassess buying habits."
She added that premium retailers may face their own challenges, as concerns will centre on whether higher taxes erode the spending power of their core customer base.
